Growth of discounters levels off at Logan
Shortage of gates, tough competition hamper carriers
Peter J. Howe, Boston Globe, 8/16/2007
After years of explosive growth, low-fare carriers are catching their breath at Logan International Airport.
From August 2001 to August 2006, low-fare carriers including AirTran Airways, JetBlue Airways, the now-defunct Independence Air, and Spirit Airlines collectively increased their presence at Logan by over 700 percent, measured by seats on outbound flights.
But they've since gone into a holding pattern. This month, discounters account for 17.7 percent of all Logan departure capacity -- the same percentage as last August. Logan actually has fewer weekly departures on low-fare carriers now than last August -- 534 compared with 540, according to Official Airline Guide data.
Industry analysts cite a host of factors for the leveling off, including constrained gate space for AirTran and JetBlue and tougher competition from legacy airlines recovering from bankruptcy.
Logan officials, who love low-fare carriers for the cheaper travel options they offer passengers and the competitive pressure they put on old-line carriers to hold down fares, are optimistic it's only a short-term plateau and more waves of low-fare growth are coming.
Nothing has been disclosed, but local aviation officials think Boston could be a prime market for Virgin America, a sister carrier to Virgin Atlantic that began service this month with $312 million in financing. Virgin America flies transcontinental routes between John F. Kennedy International Airport in New York and Dulles International Airport outside Washington, D.C., and Las Vegas, Los Angeles, and San Francisco. Virgin says it expects to serve "as many as 10 cities within our first year," but officials wouldn't say whether that could include Boston or another New England destination.
Edward C. Freni, the aviation director for the Massachusetts Port Authority, which runs Logan, said he couldn't comment on what plans Virgin America or any other low-fare carriers may have at Logan. But in general terms, he said, "I think you will see this start to ramp up again."
Freni said he's optimistic the Nov. 1 move of Continental Airlines from Terminal C to Delta Air Lines Inc.'s Terminal A, freeing up C gates for both AirTran and JetBlue, Logan's two principal low-fare carriers, will unleash another wave of growth. AirTran, which has been hampered by a split-level gate arrangement with three gates in the dingy old Terminal D and a fourth sublet from United Airlines upstairs, is likely to move to five contiguous gates in the current Continental area, Freni said.
"When that happens, I think you will see AirTran add scheduling, but I don't know where," Freni said. JetBlue, which uses eight Terminal C gates now, is contractually committed to leasing three more by November 2008, and "I think you'll see JetBlue examine more routes and options," Freni said.
JetBlue spokesman Sebastian White said, "We think there's still a lot of opportunity to expand our low-fare flights to places across the US and into the Caribbean, Mexico, and Canada. We think the airport still sorely lacks meaningful low-fare competition beyond our network."
JetBlue yesterday said it is adding a Christmas-season nonstop flight to Santiago, Dominican Republic, and in the last year has added flights to Charlotte, N.C., San Diego, and San Francisco and seasonal flights to Aruba and Cancun, bringing to 28 the number of destinations it now serves from Logan. A flight to Phoenix canceled last spring may return for the winter season also, White said.
AirTran officials had no comment on their Boston plans.
The third low-fare carrier at Logan, Spirit Airlines, offering two daily flights to Detroit and a third to Myrtle Beach, S.C., hasn't indicated it plans to grow. The nation's biggest discounter, Southwest Airlines, which normally eschews expensive and congested airports like Logan, serves the Boston market from airports in Manchester, N.H., and Warwick, R.I., and hasn't given any public indication it plans to come to Logan.
Aviation consultant Daniel Kasper, managing director of LECG LLC in Cambridge, said he attributes the Logan slowdown in discount carrier service to the successful bankruptcy reorganizations this year of Delta and Northwest Airlines and, earlier, United Airlines and US Airways.
"Part of what that restructuring was designed to do was to make the legacy carriers somewhat more cost-competitive and get them back on financial footing so they could compete with the low-cost carriers," Kasper said. "The big guys have become more cost-competitive," so there's been less opportunity for discounters to profitably expand service at Logan in the last year. Kasper said JetBlue, which counts Boston as its second busiest market after New York, seems to have deliberately slowed growth here -- other than a new connecting flight partnership with Cape Air/Nantucket Airlines -- to focus on smoothing out operations after a February storm plunged JetBlue into a week of chaos and 1,000 flight cancellations.
Boston looks like a perfect expansion market for Virgin America, Kasper said, and "I would definitely expect Boston to be on their radar screens."
Measured by how much revenue it generates for airlines, Logan is the ninth biggest US airport, driving $3.2 billion in ticket sales in the year ended September 2006, according to Simat, Helliesen, & Eichner Inc., a Cambridge aviation industry consulting firm. The biggest US airport for revenue was Los Angeles International at $5 billion, with Chicago's O'Hare, Las Vegas, Atlanta, and Dallas/Fort Worth International rounding out the top five.